Selling State Buildings: Penny Wise and Pound Foolish?

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Once again the state has found itself short on revenues and long on expenditures, and once again Governor Schwarzenegger and the state legislature have settled on an approach which temporarily dodges a bullet, only to be broadsided by a howitzer down the road. What's the shortcut scheme this time?

This time it is the sale of state buildings.

The idea is to sell 14 state buildings to companies that would become the state's landlord. In exchange for a sales price of $2.1 billion now, the state would pay $6 billion in rent for the next fifty years. How's that for creative math?

So far, the courts have not cooperated. After receiving the go-ahead by a superior court judge, the Schwarzenegger administration was rebuffed by a three-member Court of Appeals that temporarily put the idea on hold. But this is more than a question of legality; it's a question about what's right.

The problem is that this idea is not so creative as it is duplicitous. It's no different than Schwarzenegger's Proposition 57 in 2004, in which the state sold bonds for $15 billion to balance the budget for the moment, only to have to pay the money back with $4 billion in interest over nine years. It makes no sense.

State buildings are investments. We construct them to save money over the long run. If we own them outright, the costs are fixed (other than maintenance) and we don't have to pay more for the privilege of leasing them.

Sure, it would be convenient to have the money now to avoid the real decisions. But that short-term gain will come at a steep price in the long run leading us to pay three times the price we fetch. You don't have to be a math genius to realize that our convenience will come at a great cost.